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INSIDE TRACK: Saving up for a rainy day: WEATHER RISK MANAGEMENT: This week's
storms have prompted businesses to face up to the need to hedge against changes in the climate, says Toby Shelley: Financial Times, Nov 2, 2000 Arena foes, supporters battle it out HOUSTON CHRONICLE, 11/02/00 Azurx Shareholder sues over deal's price Houston Chronicle, 11/02/00 'Big-picture' strategy gives C.I. Global edge Growth-oriented, diversified fund delivers on all fronts The Globe and Mail, 11/02/2000 Calif Generators See FERC Ruling As Step, Not Solution Dow Jones News Service, 11/01/00 IN THE MONEY: Enron Looks To Un-Dip Its Toe From Water Dow Jones News Service, 11/01/00 USA: Transwestern N.M. gas line cut 25 pct on train derail. Reuters English News Service, 11/01/00 US Natural Gas Cash Prices End Up On Arbitrage Spreads Dow Jones Energy Service, 11/01/00 INSIDE TRACK: Saving up for a rainy day: WEATHER RISK MANAGEMENT: This week's storms have prompted businesses to face up to the need to hedge against changes in the climate, says Toby Shelley: Financial Times, Nov 2, 2000, 763 words As emergency services brace themselves for more gales after the worst storms since the hurricane of 1987, businesses and the public are beginning to realise what climate change means: not just flood damage but also disruption of infrastructure and transport. The Association of British Insurers says the bill for Sunday's storm will amount to hundreds of millions of pounds. This comes on top of last month's flood damage in Kent of Pounds 40m-Pounds 80m. Bad weather cost insurers Pounds 861m in 1999. While the costs of flooding are fairly easy to quantify, the financial burden in terms of business forgone is less obvious. Swimsuit and umbrella manufacturers face an obvious weather risk (although a company making both would be nicely hedged), but so do 70 per cent of all companies, according to industry experts. As awareness of such risks increases among shareholders, chief executives are less able to use the climate as an excuse for lower profits. As a result, a growing number of companies are developing weather risk management using some of the many instruments now available (see below). Europe is catching up with the US in developing mechanisms and tools to help companies manage such risk. The London International Financial Futures Exchange aims to launch weather futures contracts early in 2001; Societe Generale is developing weather hedge funds; Enron, the US energy and trading group, is launching another 17 sites in Europe around which to trade weather risk; and Weather Risk Marketing is putting together an insurance programme in the London market, aimed at FTSE 200 companies, with capacity of Pounds 100m per customer. The global market in weather risk derivatives is valued at Dollars 3bn-Dollars 8bn (Pounds 2bn-Pounds 5.5bn) and is mainly in the US. Gas and electricity market deregulation provided the impetus for UK energy companies to enter the weather derivates market. Centrica, the UK-based energy supplier, is particularly enthusiastic. Given a "normal" winter in 1999, Centrica's profits would have been Pounds 24m higher. Thor Lien, Enron's senior weather derivatives trader in Europe, values the US market at about Dollars 3bn and believes growth next year in Europe could double that. But there are a number of imbalances in the current market and brakes to further development. The very enthusiasm of the energy sector means demand for derivative hedges against warm winters far outweighs demand for hedges against cold winters. Nick Ward, weather risk broker at Spectron Futures, says higher winter demand can leave the current derivatives market with characteristics of an insurance market where risks have to be absorbed. Lack of liquidity in the market is limiting business, according to some, although Mr Ward says the derivative market can look at Pounds 50m risks. An active hedger agrees: "The derivatives and reinsurance markets are certainly developing, with some larger transactions, which may be in the tens of millions, being explored. Most deals, however, remain relatively small in comparison with the overall level of risk that could be transferred in these markets." SocGen is the only bank to have committed itself thus far to the weather risk market and is developing a Dollars 145m hedge fund activity in Europe and Asia. Diego Wauters, global head of insurance derivatives, says his team often closes two or three deals a week worldwide. It has done about 60 deals globally over the last 12 months, 70 per cent of them weather risks. Data pose a problem for some companies. Rob Preston, a director at Speedwell Weather Derivatives, says the cost of access to UK weather data from the government-owned Meteorological Office may be restricting the take-up of weather risk management by smaller companies. For data from a local weather site, the Met charges Pounds 1,500 for temperature and the same again for rainfall. Another significant brake on market development is lack of awareness. Even where treasurers are persuaded of the value of hedging weather risks, selling the idea to the board can be difficult. Peter Blogg at Liffe does not expect a flood of interest when futures contracts begin trading. Rather, the plan is to establish them as benchmarks. At a conceptual level, protecting profits from the weather is accepted by many chief executives but few are putting weather risk management into practice. David Gamble, executive director of Airmic, the UK risk managers' association, says there is a growing interest in the area, although few non-energy companies have taken an interest so far. Retailers such as Sainsbury and Tesco have no involvement, nor does Railtrack, the notoriously weather-prone rail operator. Cargill, the global trading house, is active in the US but maintains only a watching brief in Europe. The future structure of the emerging market remains unclear. Mr Preston foresees a two-tier basis: a primary market in tailored deals accepted by insurance and capital market companies; and a secondary market in wholesale traded risks appealing to insurers and energy companies. For Enron, Mr Lien sees a rapidly growing wholesale market in Europe with the extremes covered by insurers who will, increasingly, be able to hedge their exposure on the derivative market. He says that big exposures require syndicated insurance at present but in six months' time the derivatives market will have more liquidity. Copyright , The Financial Times Limited Nov. 2, 2000, 9:23PM HOUSTON CHRONICLE Arena foes, supporters battle it out By JANETTE RODRIGUES Copyright 2000 Houston Chronicle With less than a week to go before the arena referendum is put to a vote, supporters and foes put aside any niceties in favor of bare-knuckle brawling during a debate Wednesday. Both sides spent a lot of time pitching, spinning and trying to persuade members of The Greater Heights Area Chamber of Commerce, which sponsored the event. The debate started out in classic point-counterpoint style, with a panel of Houston television news anchors asking the questions. But both sides quickly went into attack mode. In the pro-arena corner were Harris County-Houston Sports Authority Chairman Billy Burge and Don Jordan, the co-chairman of Let's Build It Together, the pro-arena campaign group. Opposing them were Metropolitan Coalition President DeWayne Lark and conservative activist Bruce Hotze. "Les Alexander gets all the benefits," Hotze said. "If this was a marriage it wouldn't last a week. It is not a good deal." Burge retorted: "Mr. Hotze, you sound like Bill Clinton -- a half-truth is the blackest lie of all." After a few of Hotze's anti-arena comments received applause from the audience, Jordan chided some of those gathered. "You can be very confused and ... clap about the statements that are being made to you that aren't exactly accurate," he said. "That is one of the benefits of being here today. You can look beyond some of the advertising that has gone up, 90 percent of which is incorrect." Later, the event got even more colorful after KTRK-Channel 13 anchor Bob Boudreaux asked anti-arena activists what they knew about the deal that fiscally conservative U.S. Rep. Bill Archer, R-Houston, didn't know. Archer is appearing in the pro-arena campaigns' most recent television commercials. "I think the pro-arena campaign has been a Clinton-esque campaign of misstatements and misleading, and I think they have told people that the Rockets are going to pay their fair share," Hotze said. "They pay nothing up front. I think if Bill Archer knew all the facts, Bill Archer would not come out and endorse this." Jordan responded: "That's an incredible statement. The only thing I know about that might be more incredible than what you just heard is if anybody out there believed it. Bill Archer knows what's going on about this arena down here." Opponents accused pro-arena forces of doling out corporate welfare at taxpayers' expense, while proponents repeatedly criticized arena opponents' statements as misleading and inaccurate. Backers of the arena say it would spur downtown development, strengthen the economy, boost good feelings about the city and cement Houston's position as a world-class city. Lark said that he supports a new arena, but that taxpayers shouldn't have to foot the bill -- especially when a billionaire sports team owner stands to benefit the most from the deal. Nov. 2, 2000, 12:12AM HOUSTON CHRONICLE Briefs: City and state Azurix shareholder sues over deal's price A shareholder has sued Azurix Corp. and its parent Enron Corp. on grounds that a $275 million plan to take Azurix private undervalues the water company's shares. Azurix spokeswoman Diane Bazelides said the company has not been served with the papers and therefore is unable to comment on the lawsuit. Houston-based Enron last week offered to provide financing to let Azurix purchase its shares at $7 apiece. Enron owns a little more than a third of the water company it created two years ago and controls another third through an investor group called Atlantic Water Trust. In one of six lawsuits filed in Delaware Chancery Court, Azurix shareholder Thomas Turberg says Enron and Azurix's directors have violated their duties to shareholders by agreeing to purchase the shares at a price that is less than the water company is worth. The defendants are trying to use their control of Azurix to force shareholders "to sell their equity interest in Azurix at an unfair price, and deprive Azurix's public shareholders of maximum value to which they are entitled," the suit says. Turberg asks the judge to grant class-action status to his case, stop the transaction and award damages and legal fees. Enron shares rose $1.19 to $83.25, while Azurix shares fell 19 cents to $6.06. Azurix's shares have fallen more than 80 percent since Enron took the company public last year. Report on Mutual Funds Special Report 15-Year Review of Mutual Funds FUNDSCOPE 'Big-picture' strategy gives C.I. Global edge Growth-oriented, diversified fund delivers on all fronts, Gordon Powers says Gordon Powers SPECIAL TO THE GLOBE AND MAIL 11/02/2000 The Globe and Mail Metro M3 All material copyright Thomson Canada Limited or its licensors. All rights reserved. Lured by historically stronger returns and a recent increase in RRSP foreign-content limits, Canadian investors have poured a record $39-billion into foreign securities so far this year. And thanks to some excellent performance and strong brand loyalty among financial advisers, a fair chunk of this exodus has been heading into several funds sponsored by C.I. Mutual Funds Inc. Consider the $3.2-billion C.I. Global Fund. Under the tutelage of long-time manager William Sterling, the 14-year-old fund returned 21.1 per cent in 1997, 26.2 per cent in 1998 and 37.1 per cent last year. Over the 10 years ended Sept. 30, these strong numbers propelled it to a stellar compound average annual rate of return of 17.7 per cent, well above the 13.7-per-cent average of its global equity-fund peers. Against a backdrop of rising inflation, technology jitters and potential interest-rate hikes, however, the fund has been struggling more recently. Year to date, it has delivered barely a break-even return. Despite this recent blip, though, fund analyst Stephen Kangas, managing editor of Toronto-based Fundlibrary.com, calls mammoth C.I. Global a "must-have" fund. "Bill Sterling's big-picture strategy and [co-manager] Stephen Waite's stock-picking have worked to put this fund not only in the first quartile but right up there as a core offering within the global category," Mr. Kangas says. Mr. Sterling and his team, most recently working for C.I. through independent Credit Suisse Asset Management LLC, now have a major stake in a new portfolio-management partnership, New York-based C.I. Global Advisors LLP, that manages several funds in the Toronto-based C.I. family. This new partnership "means the management group is in place for the long haul," says Mr. Kangas, who favours arrangements where managers have equity stakes. Driven by the big-picture themes outlined in his appealing book, Boomernomics, and using discounted cash flow as his primary yardstick, Mr. Sterling has created a growth-oriented, broadly diversified fund that seldom has much in common with its benchmark, the Morgan Stanley World index. It generally contains about 140 stocks, with the largest holding limited to roughly 3 per cent of the portfolio and the top 10 stocks representing no more than 20 per cent of the pie. "You really can't do it any other way," Mr. Sterling says. "When it comes right down to it, nobody really knows who's going to win all the battles. With technology in particular, you have to take a much broader view." Similarly, although currency movements are always a factor in any global fund, Mr. Sterling makes little attempt to hedge his dollar exposure, preferring to use it as another key criterion in determining his country choices. "We're much more likely to back an exporter who's going to benefit from a sliding currency than to try and play the currency itself. That's really where you're going to benefit." Although still sporting a positive outlook for the long term, Mr. Sterling has been trying to reduce the risk in the portfolio in recent months. Despite the increased promise of an economic soft landing in North America, he still worries that U.S. corporate profits may fail to meet expectations. "We've been feeling a bit defensive for a while now. As long as central banks are raising rates -- and we think one or two quarter-point hikes in the U.S. are still likely -- you're going to see continued volatility and uncertainty, particularly in U.S. technology stocks." Consequently, he's reduced the fund's holdings in the United States and, to a lesser extent, in Europe. Right now, the fund has 52 per cent of its stocks in the United States, 21 per cent in Europe and 7 per cent in Japan, with roughly 13 per cent in cash. That's a far cry from the beginning of the year, when the fund had roughly two-thirds of its money south of the border and very little cash on hand. Over the past 18 months, U.S. tech stocks have swung dramatically, almost twice as much as the rest of the market. As a result, the securities of many technology companies are priced more like options than stocks, Mr. Sterling says. "And that means likely more volatility, rather than less. Prudent asset allocation suggests that you diversify away from an asset class as its volatility increases. Despite the very real merits of the sector, investors shouldn't have all their eggs in some high-tech basket." Although technology still plays a significant role in the fund -- big holdings include PMC Sierra Inc., Broadcom Inc., Vodafone Airtouch PLC and Cisco Systems Inc. -- Mr. Sterling quickly points to what he calls "the leopards" within the fund's largest holdings. Companies such as Corning Inc. are an increasing force in fibre optics, and ones such as utility giant Enron Corp. are "changing their spots and looking for new ways to succeed. But, unlike many younger tech companies, they still make money in the process," he says. For conservative investors looking to diversify their holdings, the fund is "definitely a core fund for most portfolios," Mr. Kangas says. "Put this C.I. fund together with, say, a strong offering like AGF International Value, and you've got an excellent foundation to build upon. Lower risk, strong returns, broad diversification -- I think this fund has really delivered on all these fronts. Highly recommended." C.I. Global Category: Global equity Manager: William Sterling Load status: Optional Total assets: $3.2-billion Management expense ratio: 2.4% Globe 5-star rating: ***** Returns to Sept. 30, 2000 1-month simple rate of return: 0.5% 3-month simple rate of return: 1.1% 6-month simple rate of return: 0.0% 1-year compound annual rate: 39.0% 2-year compound annual rate: 29.1% 3-year compound annual rate: 20.5% 5-year compound annual rate: 20.2% 10-year compound annual rate: 17.7% Top 10 holdings To Sept. 30, 2000 1. Corning Inc 3.4% 2. Network Appliance Inc 2.0 3. General Electric Co 1.9 4. Microsoft Corp 1.8 5. PMC-Sierra Inc 1.7 6. Vodafone Airtouch Plc 1.7 7. Cisco Systems Inc 1.6 8. Enron Corp 1.6 9. Citigroup Inc 1.5 10. Skandia Foersaedrings AB 1.5 Telephone: 1-800-563-5181 Breakdown by country USA 52.1% Israel 0.1% South Africa 0.5% Canada 2% Japan 6.8% Cash 12.9% Other 25.6% Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Calif Generators See FERC Ruling As Step, Not Solution By Christina Cheddar 11/01/2000 Dow Jones News Service (Copyright © 2000, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- California's power generators think federal regulators took a big step toward improving what they see as a flawed market for wholesale electricity, but may have stopped short of total solution. Earlier Wednesday, a committee formed by the U.S. Federal Energy Regulatory Commission released recommendations to revamp the Golden State's power market. The recommendations sprung from a probe conducted by the committee that sought to explain why California power prices tripled this past summer. Overall, companies supplying power to the state applauded the committee's finding that market manipulation by power generators in the state wasn't to blame, as some consumer groups had charged. FERC is the third agency to agree that there was no price collusion in the market this summer, said Duke Energy Corp. (DUK) spokesman Tom Williams. Company officials also said they were pleased by the agency's recommendation that California should allow its three utilities to buy power from a variety of suppliers and buy power in the forward markets. Previously, the utilities were required to buy and sell all power through the state's Power Exchange at market prices. The previous requirement, which bound the utilities to one supplier, effectively created another monopoly, said Enron Corp. (ENE) spokesman Mark Palmer. "Utilities should be able to manage their own price risk," Palmer said. Williams Cos. (WMB) spokesman Tim Thuston agreed. He said his company had been advocating this change, and was pleased to see it included in the agency's recommendations. However, generators did raise concerns over a so-called soft cap. Under the provision, a supplier who sells power above $150 a megawatt would be entitled to receive the bidding price, however, the supplier would have to file several reports to the FERC. Previously, all bidders in a single-price auction had to pay the highest bid paid, which was otherwise known as the market clearing price. Under the committee's recommendation, the market clearing price will never exceed the $150/MW cap. The companies also were concerned about a provision that could lead to refunds after October 1. Reliant Energy Inc. (REI) spokesman John Stout a two-year refund window is "a cloud hanging over the market." During Stout's initial review of the voluminous FERC report, he said he wasn't able to determine exactly how the FERC would establish what is the right price for power. He said Reliant would be paying attention to this provision, which he said could have broad implications for the companies who operate in the state. Other officials also noted that sometimes power is traded several times before it reaches its end-users. In those cases, how would refunds be determined, officials asked. In sharing their initial reactions to the 100-page report, company officials agreed there is still much work to be done. Officials said they plan to make additional recommendations to the state's agencies in the days ahead. The changes in the California power market are sure to affect the strategies of the state's power generators. Enron has already decided to back off plans to install 300 megawatts of new generation in the state next spring, said Enron's Palmer. The generation was part of a project proposed by the California Independent System Operator. Enron and 13 other companies are in negotiations to build the capacity, which would have operated during periods of peak demand, when prices are the highest. Palmer said the lingering uncertainty in the state's power market makes the project less financially attractive. Still, other financial opportunities could be created by the proposed regulations. Palmer said Enron's price-risk management operations could get a boost because the state's utilities will now be free to purchase power in the forward markets. Other trading companies also see an opportunity there, but none would estimate its potential value. Duke Energy spokesman Tom Williams emphasized the Charlotte, N.C., company's commitment to California. Duke, which supplies 4% of California's power, has already made a significant investment in the state, he said. Duke expects to continue to spend money in the state. For example, Duke will proceed with its plans to build its Moss Landing power plant in Monterey County. As for other power projects, Williams wouldn't provide specific details. Still, many believe additional capacity is needed to meet the state's growing power needs and lower prices. According to Williams, the FERC recommendations don't do enough to encourage new generation to be built in the state. "I think the next two months are full of uncertainty," Williams said. He added, as long as uncertainty persists in the market, companies won't want to make the investment. This point was echoed by other company officials. As the companies continue to review the order and make recommendations, it is likely officials will focus future debate on the soft cap and refund provisions of Wednesday's proposals. Still, the companies appeared encouraged that progress has been made toward correcting the state's markets. And a lot is at stake, according to Reliant's Stout. Not only is the company's future strategy in California riding on these decisions, but states like Nevada have slowed deregulation efforts in order to watch the events unfolding in California, Stout said. Stout said now is the time for consumer groups, power suppliers, utilities and the state agencies to come together "to get this power market fixed." -Christina Cheddar, Dow Jones Newswires, 201-938-5166 christina.cheddar@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. IN THE MONEY: Enron Looks To Un-Dip Its Toe From Water By Carol S. Remond 11/01/2000 Dow Jones News Service (Copyright © 2000, Dow Jones & Company, Inc.) A Dow Jones Newswires Column NEW YORK -(Dow Jones)- Sometimes it's easier to peddle a hard-sell when you don't have everyone looking over your shoulder. That's what appears to be the case with Enron Corp. (ENE) and what it's doing with its majority stake in Azurix Corp. (AZX), the water company Enron partially spun-off to the public two years ago. In an unusual transaction, Enron has offered to loan Azurix $275 million so that it can buy back its stock from the public for $7 a share - that is, any and all shares owned by everyone except for those controlled by Enron. Following some fancy financial footwork involving trusts that own some of the Azurix stock on its behalf, the Houston, Texas energy and commodity trading company appears to be priming Azurix for a sale after failing to clinch a deal the more traditional way. (In a letter to Azurix, Enron indicated that so far, four potential buyers have presented themselves. But the top suitor, who offered $7 a share, seems to have had a change of heart after taking an in-depth look at the company). Details of the latest scheme are scant. All that is clear so far is that Enron has hired Lehman Brothers as an adviser regarding its plans for Azurix. Although Enron declined to comment on its plans, people familiar with the matter suggested that a complex transaction is now in the offing. One option Enron had was to do this in the more traditional manner: Buy back Azurix shares itself. But that posed a problem. In doing so, Enron would have owned more than 50% of the water company, forcing it to consolidate all of Azurix' financials on its balance sheet - including a healthy $1.3 billion in debt. Instead, with a little wave of a financial wand, it appears Enron has found a creative way around that problem. Here's how it works: Enron loans $275 million to the management of Azurix so it can repurchase the non-Enron related shares from the marketplace. That leaves an entity called the Atlantic Water Trust continuing to hold 67% of Azurix' shares. Atlantic Water is half-owned by Enron and another trust called Marlin Trust Co. Enron has voting rights on Marlin's shares. A person familiar with the situation suggested that the transaction, which has yet to be made public, would include some form of sweetner to entice management to back an Enron-arranged sale of Azurix to a third party. "Instead of being a growth-oriented play on deregulation and privatization in the water utility industry, Azurix will become a sort of quasi utility company," said Anatol Feygin, J.P. Morgan's Enron analyst. "Once that is done, Enron will be able to cut overhead and development activity and look for a buyer." An Azurix spokeswoman said Enron's offer is under consideration. She declined to comment on Enron's assertion that the water company had retained two advisers earlier this year to evaluate its strategic alternatives. What's clear so far is that if Enron succeeds in taking Azurix private, streamlining the decision making process by excluding private shareholders and the need to report to the Securities and Exchange Commission, it won't be able to sell the water business in parts and would likely look for a buyer for the whole lot. That's because the equity of Azurix's crown jewel, U.K.'s Wessex Water Ltd. is used to back a GBP400 million credit facility. "They can't sell Wessex first because to do so they would have to take that facility out," said John Kennedy, a utility analyst at Standard & Poor's. Azurix acquired Wessex in October 1998 for $2.4 billion. People familiar with the matter suggested that Enron is now in the process of re-evaluating Wessex, as well as smaller assets in Latin America. Analysts said that Wessex may now bring in about $1.8 billion. (Taking out long-term debt that comes to about $4.25 a share). So why is Enron so eager to get out of the water business? Trouble has been brewing for a while. In September, following months of Azurix falling short of analysts' earnings, its high-profile chief financial officer, Rebecca Mark, simultaneously resigned from her position and stepped down from Enron's board. The fact is that Azurix has fallen short of Enron's expectations. The energy-trading giant appears to have misjudged the speed of privatization in the water and waste-water industry. And now with projects behind, revenues have been slow, some $1.3 billion in long-term debt has accumulated and Enron appears to have given up on its plans. At the end, Enron's seconds may soon fuel ongoing utility consolidation in Europe. As least four large European water companies are believed to be potential buyers: France's Vivendi's Generale des Eaux and Suez-Lyonnaise des Eaux and Germany's E.On and RWE. The price of Azurix shares slumped as low as $3.37 earlier this month, far below its spring 1999 initial public offering price of $19. Azurix' stock was recently trading at about $6.125. - Carol S. Remond; Dow Jones Newswires; 201-938-2074 -carol.remond@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Transwestern N.M. gas line cut 25 pct on train derail. 11/01/2000 Reuters English News Service (C) Reuters Limited 2000. SAN FRANCISCO, Nov 1 (Reuters) - Gas flows through a Transwestern (TW) natural gas pipeline in New Mexico have been cut by about 250 million cubic feet, or 25 percent, while the line is checked for damage after derailed train cars fell near the line, a Transwestern spokesman said Wednesday. The freight train derailment occurred late Sunday but the company was not informed the train cars had fallen near the gas line until Monday, when gas flows were reduced, he said. The TW pipeline, in northwestern New Mexico, feeds California gas markets and normally operates at around one billion cubic feet a day. The spokesman for Transwestern Pipeline Co., a subsidiary of Houston-based Enron Corp. , was unable to say when the line would be back at normal capacity. No one was believed to have been hurt in the accident, he added. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. US Natural Gas Cash Prices End Up On Arbitrage Spreads 11/01/2000 Dow Jones Energy Service (Copyright © 2000, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- U.S. natural gas physical prices mostly rose Wednesday with the New York Mercantile Exchange futures board, but still held a 15- to 16-cent differential to the Nymex, one of the largest seen this year, traders said. The cost of carrying gas to storage blew out the differential, a Houston trader said, as some pipelines refused to allow more gas into storage at this late date. "Storage (and arbitrage) wasn't an option," a trader said. That stagnated some non-incremental buying dead in its tracks, he said. He expects the 15- to 16-cent differential to continue on Thursday. Also, in the West, gas was looking for a home after some transportation had to be redirected because of a force majeure on Enron's Transwestern East of Thoreau line. A train derailment in New Mexico had damaged the line, cutting back and shifting gas deliveries from the East to the West, traders said. The Nymex December futures gas contract settled Wednesday at $4.686 per million British thermal units, up 19.6 cents as traders brushed aside an apparently bearish American Gas Association storage report and bought gas in preparation for possible wintry forecasts. Although predictions were for a build in the 60-65 billion cubic feet range, the AGA said 70 Bcf was added to storage last week, still within some expectations and considered slightly bearish. The anticipated total fill of about 2.7 trillion cubic feet has been a factor in driving prices down these last few weeks, marketers said. Swing physical gas for November at the benchmark Henry Hub in south Louisiana rose 4 cents-8 cents to a $4.32-$4.48/MMBtu range. November index at the Henry Hub is $4.50/MmBtu. Transcontinental Gas Pipe Line at Station 65 deals rose 2 cents on the bid, but fell 4 cents on the offer to a $4.35-$4.44 range. Index is seen at $4.51. At Katy in East Texas, buyers paid $4.25-$4.39, up 1 cent on the bid, down 3 cents on the offer from the Transwestern outage. Index is seen at $4.43. At the Waha hub, prices closed at $4.17-$4.27, down 5 cents-10 cents, also as a result of the Transwestern outage. November index for the first of the month is at $4.50, flat to the Henry Hub. Prices in the West and California and New York moved above $5.00, traders said. The California Border index is put at $5.19; PG&E Citygate at $5.33; Transcontinental New York Zone 6 line at $5.10 and Texas Eastern's M3 line at $4.96, traders said. -By John Edmiston, Dow Jones Newswires,713-547-9209; john.edmiston@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.
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